%PDF-1.6 %���� It also affords manufacturers more control over the customer experience. The study concluded that current operating environment demands a more analytical, agile, and clinical view through better use of technology, greater frequency of risk … In today’s global economy, companies that proactively plan how to mitigate supply chain disruptions will be better positioned to deliver their products on time and on budget. Â, Manufacturers are expected to spend close to $267 billion on Internet of Things (IOT) by 2020  to improve productivity by increasing automation, improving equipment monitoring, and better connecting systems. The purpose of operational risk management can be defined as enhancing hazard identification in the operational environment in order to eliminate risks or reduce them to an acceptable level. In addition, establishing formal quality assurance procedures and taking other proactive steps can help a manufacturerÂ, the potential to add value throughout the supply chain, from track-and-traceability and regulatory compliance to asset maintenance and contracts management. Attacks can force complete shutdowns of certain facilities, corrupt information technology (IT) systems and, at times, even force plant closures. For example, by partnering with local governments and secondary schools to engage potential applicants earlier through apprenticeship programs or introducing co-bots or wearable technology to help boost productivity.Â,  on steel and aluminum imports from several countries. At the same time, experienced workers are retiring, and the skill sets needed by manufacturers are shifting due to evolving technologies.Â, , manufacturers should think proactively. Analytical tools and predictive modeling capabilities enable manufacturers to extract more meaning and direction from massive data sets. It also affords manufacturers more control over the customer experience. PK+&���wl�4ߪ�1|�|����*z��Rl�8�1�Ȼ�����E�����wx ���|�Z��Q�IjʲV_!n�ve�6އlT���D�E_��/��;t��U,\l���LPwZ��A�G�u]�M�̕`� �r�2kp>�p$��l�*B��b�������iW7���=x�D#L�*6��P�/�֞�|���-�t�,��Zk�;���A���?��}��|ic�n� ��hK�o>�m��h�P��tZ���I������uS�}γ[$]Z�%�:ce�� �"qz�?�A�ٌ�E���xk�F9Kpw0��xҬ�٦P�i�������7~L�Ol\�GDfh �u�+7��l�f���ץ�j��FW2��hE��Jz�JT��O� أ}����@^���W�� j/&���;�v�fʲ�~ȩ>� �T��z�Z�%;�J��7�7�c��M�(�.��ӄ�ŗ�&����hŧ;���pSHL2��4��aG�5���ۃlDw��G�$���(��7���Ձ��#�����sd�5P��]���)�CA����G��XŖ��+rIh�H�i0.-J��߯#��o^��~� ��,Ws��If� �Ǧ�Cs�y���b>'���2���C�}�gެ���a Operational risk is defined by the Basel Manufacturers are faced with challenging ethics and compliance risks and regulatory requirements. A criminal attack, ineffective cloud security, IT security failure or the vulnerability of … Steve has worked in the discrete and process manufacturing … (j��� ��x�I���d��W�����R3�m�K In automotive manufacturing operations, risks that go unaddressed can lead to missed production targets, safety incidents and vehicle recalls. The report examines the risk factors in the most recent 10-K filings of the largest 100 publicly traded U.S. manufacturers. 453 0 obj <>/Metadata 44 0 R/Outlines 116 0 R/PageLayout/OneColumn/Pages 448 0 R/StructTreeRoot 131 0 R/Type/Catalog>> endobj 44 0 obj <>stream What are best-in-class manufacturers doing to excel in opera… Learn more about how we can help protect your business. If a product component is defective, a business could face legal or regulatory violations. Rather, we look at the subset of risks that are Operational in nature. Cyber Risks. But pursuing a DTC strategy may also introduce new risks that middlemen would typically retain. It could bring exposures related to product labeling, handling customers’ credit card data, or the logistics of shipping to residential doorsteps. It could also damage existing relationships with wholesale distributors and retailers that manufacturers may need to rely on in the future.  Â, A 2018 report by Deloitte and the Manufacturing Institute estimates that the current skills gap may leave 2.4 million manufacturing positions unfilled between 2018 and 2028. Many Americans see a lack of stability, growth opportunities, and competitive salaries in the manufacturing industry. But as manufacturers incorporate IOT and other technologies into operations, they also become more vulnerable to cyber-security threats that could put their physical assets, intellectual property, and more at risk. Taking steps to prioritize cyber-security and insurance protections can help safeguard your smart facility from hackers and minimize the risk of downtime and lost profits. Â, More than 3 million industrial robots will be in use in factories around the world by 2020, according to the International Federation of Robotics. Collaborative robots, or co-bots, which work alongside workers, can help bridge talent shortfalls and improve productivity in the manufacturing industry. As manufactures incorporate co-bots into their operations, they also need to address potential risks. For example, manufacturers could be held liable for product defects, personal injury, or property damage resulting from co-bot failures or malfunctions.Â, Additive manufacturing, or 3D printing, can help manufacturing operations boost production and reduce costs, but this new technology may also introduce risks related to counterfeiting, product liability, professional liability, and more. Criminals may create and sell counterfeit, lower-quality versions of a manufacturer’s products, which could result in false product liability claims. But pursuing aÂ, DTC strategy may also introduce new risks, retain. Operational risk is as old as the manufacturing industry itself and yet the industry has only recently arrived at a definition of what it is. Executive Perspectives on Top Risks for 2016: Manufacturing and Distribution Industry. Cloud computing enables manufacturers to more fully benefit from robust IT capabilities. Theft of intellectual property (IP), including patents, trade secrets, … Manufacturers face challenges from powerful forces as … A recent industry study examines manufacturers' risk-assessment strategies, implementation, and evaluation to determine best practices in risk management. Possessing the knowhow on the … Technology like blockchain, sensors, and telematics are providing manufacturers with real-time traceability of products so they can more quickly identify and remove defective inventory from the supply chain. However, there are challenges that come with adopting this emerging technology.  For example, regulatory and legal environments are still playing catch up and are open for interpretation.  In addition, integrating blockchain with legacy systems requires significant capital investment.Â, Going direct to consumer (DTC) can result in increased efficiency and greater profits by cutting out the middlemen — wholesalers and retailers. But as manufacturers incorporate IOT and other technologies into operations, they also become more vulnerable to cyber-security threats that could put their physical assets, intellectual property, and more at risk.Â, Taking steps to prioritize cyber-security and insurance protections,  can help safeguard your smart facility from hackers and minimize the risk of downtime and lost profits.Â,  will be in use in factories around the world by 2020, according to the International Federation of Robotics.Â, can help bridge talent shortfalls and improve productivity,  incorporate co-bots into their operations, they also need to address potential risk, Additive manufacturing, or 3D printing, canÂ, , which could result in false product liability claims,  separation between product designer and producer also blurs, raising questions about which party is responsible for product defects.Â. For the last two years, the oil price as been in free fall and, at the … Volatility in … And while both may present challenges that are out of automotive manufacturers and suppliers’ direct control, there are steps industry players can take to mitigate and manage the risk. The top five issues affecting manufacturing operations: 1. Reputational risk is also a factor, as stock prices and brand … Research Conducted by Protiviti and North Carolina State University’s ERM Initiative. People, trade, cyber and efficiency issues … According to a recent report,Â,  is the most popular blockchain use case for manufacturing organizations. Soci… However, there are challenges that come with adopting this emerging technology.  For example,Â, regulatory and legal environments are still playing catch up and are open for interpretation.  In addition,Â, Going direct to consumer (DTC) can result in increased efficiency and greater profits by cutting out the middlemen — wholesalers and retailers. This is without having to maintain related software, hardware, and infrastructure in house. The annual analysis of the most frequently cited risk factors found the supply chain remains at the top of the list - cited by 100 percent of manufacturers we analyzed - while emerging … In …  are increasing raw material costs for many manufacturers that source from international suppliers. The quickening pace of technological advances presents significant challenges to risk professionals as well. ���s|��>� Significant concerns over additional exposures caused by the global nature of supply chains are fueling the reshoring trend in the manufacturing industry. In today’s global economy, companies thatÂ, proactively plan how to mitigate supply chain disruptions,  will be better positioned to deliver their products on time and on budget.Â, Manufacturers are expected to spend close toÂ, $267 billion on Internet of Things (IOT) by 2020,  to improve productivity by increasing automation, improving equipment monitoring, and better connecting systems. Several manufacturers have altered product lines to keep business … By identifying the risks presented by the state-sponsored industry in China and effectively anticipating market changes, the company was able to adapt: reducing its mining and smelting operations and increasing its focus on specialty product manufacturing … Several energy sources including electrical, mechanical or chemical equipment … Cybersecurity Hybrids. A list of these risk areas is again industry specific, but a good starting point is as follows: Environmental; Heath; Safety; Quality; Compliance; By limiting our definition of the Operational Risk Management framework to these areas, we can ensure that the right people are involved in the initiative and it does not become overwhelming. These risks are often associated with … But according to the “2014 BDO … The Risk Matrix is produced by the Risk & Insurance editorial team.  Â, Coronavirus (COVID-19)  •  < 1 min read.  As a result, many companies are considering new suppliers from regions not impacted by tariffs.  While diversifying supplier relationships is one way to address increasing costs,Â, product defect liability and supply chain disruption risks, Theft of intellectual property (IP), including patents, trade secrets, trademarks, and copyrights, costs manufacturers and other businesses billions of dollars every year.Â, A 2017 investigation by the U.S. Trade Representative concluded that, reate greater opportunity for IP infringement and theft, Regulatory, legal, and trade protections may also be absent or less stringent in other countries, For a manufacturer that has invested considerable time and resources developing products, processes, or ideas,Â, mplementing an IP risk management strategy, A variety of potential disruptions, from grounded flights and natural disasters to cargo theft and quality control issues, can impact the flow of goods through a supply chain. Risk … To help identify these risks, BDO has released the 2017 BDO Manufacturing RiskFactor Report which identifies supply chain disruption as the No. In addition, establishing formal quality assurance procedures and taking other proactive steps can help a manufacturer prepare for and survive a product recall. Â, For manufacturers, blockchain has the potential to add value throughout the supply chain—from track-and-traceability and regulatory compliance to asset maintenance and contracts management. ���8���g�ټf�@�˔̣?�����C��Zd���s5x��$�/"�� Qf|0��:�{�y��O�S�3|���T���S��TH�~2�S���l������g���NtȊ��>� ����yp=1o You can use operational efficiency/lean manufacturing principles to eliminate waste, shorten the process and improve deliveries and costs. If a product component is defective, a business could face legal or regulatory violations. More than 3 million industrial robots will be in use in factories around the world … Manufacturers will likely also face lost sales and damaged reputations. © Liberty Mutual Insurance Company, 175 Berkeley Street, MA 02116, 10 Critical Risks Shaping the Manufacturing Industry in 2019,  sector is a key driver of the U.S. economy, providingÂ, Even with this activity, several factors challenge growth.Â,  blockchain, co-bots, and “smart facilities”Â, to addressing talent shortages, supply chain disruptions, and intellectual pro, The Manufacturing Risk Matrix featuring 10 critical risks, The Risk Matrix, produced by the editorial team at Risk & Insurance,  a manufacturer’s supply chain, product recalls can also be very costly.  Food-related recalls, including both direct and indirect costs, may amount to as much asÂ,  executing a recall, manufacturers may also experienceÂ, lost sales, litigation, regulatory fines, and reputational damage. The separation between product designer and producer also blurs, raising questions about which party is responsible for product defects. Â, The Risk Matrix is featured with the permission of Risk & Insurance®. ��+q�y�'hO�ػA�m�g��������u!�����l���p�:Yq2H��WXL����"g���*"M���?ObA���-oO�5vC��j:L3{�B-���������:��Y��|���7���R+N���*��*o�;&~v�.���a���@d�5�1���s�����2,��qK>�;��j�y�cl��?�����S$Tk��ҭc��~��y(���&n���ƅbX,Ywea�!R\�pH����+�a��;�X:y�k�V�5 Not only do they typically employ a high number of employees, their facilities are often widely dispersed … At the same time, experienced workers are retiring, and the skill sets needed by manufacturers are shifting due to evolving technologies. To bridge the skills gap, manufacturers should think proactively. Robot Proliferation. qs�fQuQ�7��ehĵ�����m�EhV.��oN�U��g��ӯms������n�A0R����A��@�q��� 2�4p?ޯ�R��Y^�\�'�R�\\@�CN�^˪��r�OD������,�6�������,w�� zںo� ���N�7�|���W�!�eБo��>��:cS. In the event of equipment failure, temporarily shutting down operations severely affects the … �.���*E� �/���������y�7%���{ig���? Operational risk focuses on how things are accomplished within an organization and not necessarily what is produced or inherent within an industry. Technology like blockchain, sensors, and telematics are providing manufacturers with real-time traceability of products so they can more quickly identify and remove defective inventory from the supply chain. youtube. I believe there are two main swing factors in the automotive industry: regulation and demand. ���+�2�9:G�3.����܃V;��)�z����U�ϕ����̊�a�~��@�M�f: �O|z�O�"�� v^��L��~����Κh According to a recent report, managing supplier contracts is the most popular blockchain use case for manufacturing organizations. Best-in-class manufacturers, defined as the top 20% of aggregate performance scorers, have been found to achieve higher overall equipment effectiveness (OEE) and less unscheduled downtime while experiencing less than half the injury rate of average performers, according to Aberdeen Group research. Unexpected risks are all around us in today’s volatile, uncertain, complex, and ambiguous world (dubbed “VUCA” by the US Army War College). Intellectual Property Protection. The volatility in demand, large investments in capital assets, and the complex nature of operations are all issues that make companies operating in fast-changing manufacturing environments unique… Top Operational Risks . 3 impacts of long-term COVID-19 on workers comp claims healthcare employers need to know, The manufacturing sector is a key driver of the U.S. economy, providing nearly 13 million jobs and generating more than $2 trillion in gross domestic product (GDP) in the third quarter of 2018. Even with this activity, several factors challenge growth. From incorporating technologies like blockchain, co-bots, and “smart facilities” to addressing talent shortages, supply chain disruptions, and intellectual property theft, the manufacturing sector faces a variety of emerging risks. Â, The Risk Matrix, produced by the editorial team at Risk & Insurance®, plots critical risks facing the manufacturing industry based on the frequency and severity of each risk. Â, In addition to causing major disruptions to a manufacturer’s supply chain, product recalls can also be very costly.  Food-related recalls, including both direct and indirect costs, may amount to as much as $10 billion every year. In addition to covering expenses for executing a recall, manufacturers may also experience lost sales, litigation, regulatory fines, and reputational damage. With an increase in cybersecurity threats, there has also been an increase … the global industrial metals industry. Disastrous equipment failures. During the process map stage, you may identify waste. It could bring exposures related to product labeling, handling customers’ credit card data, or the logistics of shipping to residential doorsteps. Lockout / Tagout. The risks … Risk assessment in the manufacturing industry is vital in warding off all threats. 1 risk in the industry. THE OIL INDUSTRY NEEDS TO ACT NOW TO PREVENT OPERATIONAL RISK FROM THREATENING PROFITABILITY. Safety hazards, aging assets and security threats can … SCADA comes in handy in keeping your whole system safe and sound. For example, by partnering with local governments and secondary schools to engage potential applicants earlier through apprenticeship programs or introducing co-bots or wearable technology to help boost productivity. Â, Recently imposed tariff increases on steel and aluminum imports from several countries are increasing raw material costs for many manufacturers that source from international suppliers. As a result, many companies are considering new suppliers from regions not impacted by tariffs.  While diversifying supplier relationships is one way to address increasing costs, product defect liability and supply chain disruption risks could outweigh the benefits.Â, Theft of intellectual property (IP), including patents, trade secrets, trademarks, and copyrights, costs manufacturers and other businesses billions of dollars every year. A 2017 investigation by the U.S. Trade Representative concluded that annual cost of IP theft to the U.S economy is between $225 billion and $600 billion. Expanding operations overseas can create greater opportunity for IP infringement and theft as supply chains and networks grow. Regulatory, legal, and trade protections may also be absent or less stringent in other countries. For a manufacturer that has invested considerable time and resources developing products, processes, or ideas, implementing an IP risk management strategy is critical for long-term success. Â, A variety of potential disruptions, from grounded flights and natural disasters to cargo theft and quality control issues, can impact the flow of goods through a supply chain. 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